Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Archive for March, 2014

Aerial picture of student tent camp in front of the UN office in Caracas (Thanks MD!)

One goes to Caracas and picks up so many stories, that when you return you don’t know where to start. But I thought I would lead up with the story of the students in front of the United Nations office in Caracas. In some sense it encompasses a number of stories of what is going on in Caracas in the protest movement an its relationship with the Maduro Government.

Essentially, a bunch of students (or not) have set up camp in front of the United Nations office which is in Avenida Francisco de Miranda in Los Palos Grandes. I may not like the #SOSVenezuela hashtag, but, as you can see in the picture above, they have focused on what the hell is the UN doing, or not, in Venezuela. But their reality, their plan is a bit more complicated than that.

The first day, the students set up maybe a couple of rows of tents. But, as you can see in the picture above, taken by a buddy from the building in front (Thanks MD!), by now they are up to four rows and growing.

It is very colorful as the picture below shows, but this is more than just a spur of the moment plan. I talked to the students last week, and their plan is much more complex than just sitting there.

Another great picture by MD (or is it TD ot TT?)

When you first talk to them,there are a number of surprises. First, they are not all from Caracas. Second, they are not middle class. Finally, they are not all students, as many of them are part of radical, left wing groups 8yes!, real left wing not imitation Chavistas!) which oppose the Government. So, for fools that claim that these protests are somehow motivated by the US, driven my middle class students, please come down and talk to them. You will be surprised, really surprised.

The second interesting aspect, is that the UN is just a way of focusing on something. They know that the UN will do not much more than make a statement or two. But they also know, that where they are, they should be safe, they are close to Altamira where they can go protest every night and in a location where the protests can grow, as they have grown in the last week.

But more importantly, they think that Maduro is playing a game of patience. They believe Maduro wants the students to get tired, wear out the opposition with repression and nightly fights, which, much like in 2002 in Plaza Altamira, will lead to the students or the opposition getting tired and giving up.

But they have no plans of giving up.

Their plan is to grow the camp, as long as it is livable. To make their presence a nuisance, but one that gets the approval of the neighbors. But it has to be livable and sustainable. They have received donations, they have a couple of Porta Toilets, they cook for everyone, they organize protests. But more importantly, they rotate. The tents may have someone’s name on it, or State, but the truth is that they alternate. Each person has someone to occupy their place. The idea is to outlast the Government, to out-tire the National Guard or the Bolivarian Police. After all, nobody can say they are violent (even if they go help in Altamira) but if the Government were to decide to move them out, repress them, it would be the Government that would look bad.

For them, the UN territory, IS their territory for the time being.

And just to make a point, they have set up a sort of “museum” of the weapons of repression. The left overs from the National Guard attacks. This shows who is the violent one. Maduro asks for dialogue, but responds with violence and repression. While the students are just sitting there.

The students are more than just anti-Government. They are doing this, because the revolution has simply blocked their progress. They see most students finish their studies and either stay unemployed, start a business for which their studies are useless or simply, leave the country. Emigrate. And they think the revolution is to blame for this. Many of them come form poor families, but somehow they managed to get into the regional universities. And what they see is that their future is blocked by a Government that wants to dominate everything, including their families. So, they don’t want to put up with it. Better protest like this looking for change than waiting for a degree that will do nothing for their future.

And it is fun too. They organize activities, talk to friend meet friends. Hell, if you have nothing to do, why not go visit them? You will be around people your age, talking about like, the future and why they are doing it. I did that and it was lots of fun. Imagine being their age!

And they have activities all of the time. Last weekend they had a vigil with candles.It was away to feel together, to have people join them. And who could not be moved by their sacrifice? After all, they are out there most of the time. Fighting in their own way for what they believe in.

If I was Maduro, I would not want to fight against the conviction and dedication these students show…

Note added in the morning the next day: Last night the students were attacked. I have heard different versions, the correct one seems to be they were attacked by someone in a truck an dnot by the National Guard with tear gas.

I am not sure if this was in response to that, or the students had planned to expand anyway. In fact, they seem to suggest they were going to expand when I talked to them Saturday. Maybe the idea is to peacefully challenge the Government right in front the UN’s nose. Stay tuned..

It is premature to judge the Sicad-2 system yet, but I think it will be premature to give judgement on it for quite a while, so it is worth talking about what has (finally!) happened with this nascent foreign exchange system.

First of all, I clarify what I tell everyone that wants to listen: this is not a trading system for fx, as has been reported in the international press. This is a system by which the Government allocates foreign currency to those that request it, with the Government exercising a significant discretionary judgement in the amounts and levels at which people are allocated the foreign currency.

The Government took quite a while in implementing the system and it is still not fully functional, but I guess it was getting to be somewhat embarrassing to announce that it would begin operating so many times and having it postponed for almost a month.

So, the first good thing to say about Sicad-2 ,is that it is here! Finally!

The bond part of the system is not functional, but should be up and running soon. Basically, right now you are just given cash. At some point in the future you will be told that you were given the equivalent of the amount allocated to you, but in the form of a bond at the price of that particular instrument in the international markets. There will be uncertainty in the final price as the bond will be sold in two or three days.

So far, only banks are part of the system. The regulations for brokers are not out yet and they have not been authorized to work in the system. Many banks have yet to begin operating with Sicad-2, essentially because they have not given the system an urgent priority and are taking their time starting operations. Other banks, you can even place orders via their webpages.

The second good news is that the Government wisely decided to operate a a price higher than apparently many people expected. This is good for reducing the distortions, it will improve the fiscal balance, create incentives for foreign oil companies to invest in the Heavy crude projects and help with PDVSA’s cash flow. According to the President of the Venezuelan Central bank, foreign currency has been allocated between Bs. 50 and 61 with the average price each day at Bs. 51.84 and Bs. 51.58. Apparently, no order above Bs. 61 has been filled.

The parallel market went down to Bs. 55 before Sicad-2 began operating, but is being indicated at Bs. 75 today already. Either people sold a lot of dollars ahead of the start of Sicad-2 or they were expecting much lower levels for it.

Reportedly, individuals are being assigned, so far, small amounts, even if they requested large ones. Similarly, many company orders are allocated a large fraction of their order, but not all. The Government is not reporting total amounts.

Demand has been slow. On the one side, those requesting dollars may not have an account in dollars in Venezuela or in the case of companies, they are still looking at the legal issues surrounding Sicad-2. On the financial institution side, not all are ready for it.

In the end, the big question remains how much is the Government planning to sell via Sicad-2. This is what will determine its success. We believe that it will only work if part of the foreign currency allocated to Cencocex at Bs. 6.3 per US$ or the Sicad I at Bs. 10.8 per US$ is moved up. Perhaps the fact that Sicad 1 was lowered to Bs. 10.8 per US$ implies that the Cencoex dollar will be moved to the Sicad 1 rate. There are indications that this is what the Government has told some industries in private, but it will require increasing regulated prices significantly.

Thus, the conclusion is that it finally started, foreign currency is being sold at a good level to make the system successful but we don’t know yet about whether the Government will sell daily average amounts that are ample to satisfy demand and make the system a total success.

Despite the cartoon above, it is looking well, but we reserve final judgment until wee see the dynamics for a coupe of weeks.

Today’s spectacle at the Organization of American States was truly shameful for anyone that believes in free speech and the basic rights of people. The Government of Panama had graciously given up its representation to have opposition’s Maria Corina Machado to speak at the OAS in representation of the opposition, to present the case of the repression and the lack of democratic rights that Venezuelans face today.

And instead of accepting that fact, this club that seems to represent the so called “leaders” of Latin American and the Caribbean, proceeded to vote on whether Machado’s speech should be made in a public or in a private forum. In the end, 22 countries voted against the public forum and only 11 voted in favor.

Ironic and depressing that in order to listen to charges of censorship and repression, the representatives of these so called “democracies” had to start by protecting the repressor, Dictator Nicolas Maduro, violating not only the Charter of the OAS, but Ms. Machado’s rights and that of the opposition to be heard in a forum which is supposed to be there to defend the basic rights of people across the Americas.

And while I can understand the strong dependency of the weak Caribbean economies on the stupid (or is it?) largesse of the even more stupid revolution, I was most disappointed at how so many of these Latin American countries were ready to prostitute themselves in order to protect their mercantile interests. It is remarkable how low these mostly leftists Governments have fallen. Despite being democratically elected, they were not willing to give a voice to the over 50% of Venezuelans that find themselves discriminated against and repressed by the Maduro Dictatorship.

And in doing so, they are trying to defend the most repressive Government, save for Cuba, to have risen in the region in the last two decades. How these representatives and their Governments can sleep at night is beyond me, more so when some of them were victims of similar repression in the past.

But somehow they are short sighted enough in thinking that this will not happen again in their countries and that their commercial interests are being protected by their unethical actions. Both premises are actually wrong. As the world turns, their countries may swing back to repression and they may need the same type of solidarity Venezuela’ opposition deserves today. But more importantly, their belief that their actions in support of the Maduro Dictatorship will somehow lead to payment of Venezuela’s debts with their countries or companies is simply wrong. As stated by Minister Ramirez or the President of the Central Bank, Nelson Merentes, there is no money to pay anything but the foreign currency budget they have established for the year 2014.

So, forget it! You will not collect under Dictator Maduro. In fact, you would probably have a better chance under a change in Government that would put order in the economy and reduce some of the absurd subsidies present in the Venezuelan economy. Only in this case, could Venezuela receive loans and cut subsidies which would, with very strict management, allow it to pay its debts with these countries, that so easily supported what can not be supported under any moral framework.

But in the end, these mediocre diplomats really blew it. For one thing, Machado’s visit captured even more attention by the refusal to receive her publicly. CNN would not have interviewed her as prominently as they did today. And via that press conference and the distribution of the video she meant to show at the OAS, Machado has made her point and is likely to make it even stronger in the upcoming days.

Here is the video she meant to show to these diplomats who think the world is static:

And it was pitiful to see Brasil’s representative justifying the ¡e private session because of Machado’s “circus”. A circus composed of herself, an elected Deputy of the Venezuelan National Assembly who is likely to have her immunity lifted and jailed upon her return, a student representing the more than 1,600 students jailed so far in one month of protests and a mother. A mother whose daughter was killed by the repressive forces of the Maduro Dictatorship. A mother who is still grieving but thought and believed she would find compassion and understanding in a forum that under normal circumstances is supposed to defend the rights of the people of the Americas.

Instead, she was laughed at and labeled a “circus”. Brasil’s leaders are not as close to God as they may erroneously think.

And this grieving mother was not even allowed to speak and was forcibly removed from the press room of the OAS.

Does it get more shameful and depressing than that?

And while Brasil has proven that it does not have the moral stature to call itself a leader of the region, others have shown to have more dignity, morals and leadership. Starting with Panama, who gave Machado the chance to speak, even if she was silenced by the OAS, using the same censorship techniques that the Maduro Government has so effectively used. And following with these countries:

who seem to understand that one day, they may face the same situation and they would like the same support they gave today to the Venezuelan opposition. I want to thank all of them for their respect of human rights and for their transparent behavior, even if they face the same commercial problems in their interactions with the Venezuelan Government.

Most of the Mercosur countries showed that the letter of their charter is worthless as democracy is simply irrelevant, as had been shown previously in their eagerness and perverted acceptance of Venezuelan into their club of undesirables. But they ratify it today. They could care less. So do we.

To us, they simply show how corrupt, unprincipled and unethical they are.

A lot of people argue that these protests are too early. That the barrios are not participating. That the people still support the Government widely and many other such arguments. While there is evidence to counteract each of these claims, I think they try to oversimplify the problem. In the end, the “barrios” are not where the opposition is weak, it is in the very rural states, where the people have a very high dependence on the Government. These are the true Chavista strongholds, where the media is fully dominated by the Government and the opposition gets less than 40% of the vote in any given election. In the barrios of the big cities, the 2013 Presidential elections tended to be closer, with the opposition scoring wins in many.

At the same time, anyone that has talked to the students in these protests, can see that they come from all over the place. In fact, in my conversations in Plaza Altamira when I was there three weeks ago, I found a very large fraction (I would say one out of every two) of the students came from poor neighborhoods.

But the argument continues from the Cassandras that see Chavismo as impossible to dislodge, too popular and too ingrained in the Venezuelan population.

This, of course, goes against logic: Maduro barely squeaked by a year ago (if he did, which I am still not sure happened) and since he took over, inflation has doubled and scarcity has gone up by almost a factor of three (Datanalisis says it is at 47.7%). I just don’t think people are that insensitive to their problems.

And yes, Maduro did recover for the regional elections thanks to the Cadakazo, but conditions have worsened significantly since.

But we (and the Government!) all should take notice of the latest poll by Datos, a well respected polling firm, a copy of which someone sent me and which shows that the Government’s approval, popularity and acceptance has deteriorated dramatically. In fact, I would even say it has deteriorated more than I expected and in some aspects, the result surprise me.

Let’s start with the basics. According to the poll, 43.7% consider themselves to be opposition, while only 27.1% consider themselves to be pro-Government. In the lowest strata of the population, Class E, 36.4% of the people see themselves as pro-opposition, while it is only 32.5% who consider themselves to be pro-Government. (The same number is 62.4% and 18.2% in classes A,B and C). So much for the opposition not resonating or penetrating in the poorer strata of the population.

When people are asked if they things as being fine or not, basically the hard core pro-Government 27.2% of those asked, say things are fine (Define as being well, or more or less well), while 72% think hings are going bad or not very well.

Enough to make any Government nervous…

But where things really get surprising in my opinion, is on questions that should make Maduro and his cronies truly nervous. Like 46.4% of the people think Venezuela is a Dictatorship, while only 42.5% think it is a democracy, for example.

Or that 50.4% think Maduro is doing a negative job, 23.6% think it is positive and 21.3% think it is neither positive nor negative.

And if this were not enough to make any Government official very nervous, 66.1% of the people think dollar scarcity is the Government’s fault, while only 3.1% of those polled think it is the private sectors fault. And 53% of the people think scarcity is Maduro’s fault, while only 14.4% think it is the private sector’s fault. And 51% blame the Government for inflation, while only 8.6% thinking it is the private sector’s fault. Amazingly, despite these numbers, 46.5% still think the Government can solve the country’s problems, while 47.1%, don’t think so.

Finally, 61% of those polled think that the Government’s reactions to the protests has been disproportionate and a mistake, while only 29.5%think it has been correct or adequate. Moreover, when it comes to how many people think the Government has to rectify its policies, 87% of those polled think they have to.

To me, these numbers say the Government is in real trouble. They show that Chavismo sin Chávez is a flimsy proposition. If these were the numbers up to March 2nd. , I suspect they are much worse now and what the Government has been doing goes counter to what those polled suggest. Polls are inaccurate, but I saw Datos’ polls before the Cadakazo and afterwards and I can assure you they gauged well what happened.

If I were the Maduro Government, this poll would make me very nervous indeed!

I am still amazed by the number of people that are still saying we should wait for elections, bla, bla bla. The video above proves beyond any doubt that Nicolas Maduro has become the Dictator of Venezuela. He has to go. Period.

And if you still have doubts, read Gustavo Coronel’s article “Approaching the Unthinkable” about Venezuela importing oil and you will realize that indeed, under Chavismo, all that oil underground will always stay there.

Almost eleven months ago, Nicolas Maduro was elected President and since then, the Government’s economic team has been telling us about the new foreign exchange system (fx for short) in the works, which was almost ready. Today, everyone wants me to write about the “new” and “improved” fx system, called Sicad 2, but there is not that much really that I can say about it. The Devil is in the details and we still don’t know most of them.

Meanwhile, Maduro keeps thinking that talking and not working, is the way to survive as President. He now has a new program (above), While that may have been something good to do for his former boss, he just does not foot the Bill. I mean who wants to listen to Nicolas give us his usual BS that half of Venezuelans are right wing fascists oligarchs, and the other half pure PSUV socialists? If that were true, there would be hope for Venezuela, not because we need more oligarchs, we have enough with Chavistas, but because there would be more market ideas, which does not seem to be what the opposition is proposing either. But Nico sounded nostalgic tonight, maybe he has been reading too much Dieterich these days. Eight weeks left of this nightmare? First time I am rooting for a Chavista prediction!

But going back to the new fx system, the so called Sicad-2, which is what people want to know about, all I can sayis , so far it looks like So-So-Cad, more than Si-Cad in my opinion. And I do hope they change my mind in the upcoming days. I would love to be proven wrong.

But let me be clear: Sicad-2 is a huge and positive step for Chavismo. First, it is a significant break with their ideological straight jacket, which has tied them for so long, and it it is very positive step for PDVSA, which will improve its cash flow by selling dollars at a much higher rate than the official Bs. 6.3 per US$ or the Sicad-1 rate of Bs. 11.8 per US$.

End of positives.

Because in Sicad-2, the Government has not created a foreign exchange market, but as usual, a complicated auction-like system, in which it is not clear who will win and how much you win. This is typical Chavista thinking: They spend eleven months thinking of what to do and come up with a Goldberesque system for fx trading.

To begin with, what is the fixation with bonds? Why can’t people trade Bolivars for US Dollars, Euros, or Yuans? (or vice-versa). Remember that bonds were introduced in the fx system as a pantomime to mask the true fx rate at which things were being done. The Government made it a criminal activity to buy or sell Bolivars for dollars or vice-versa, unless you used securities. You could not even say at what equivalent price transactions were being made.

But now, neither how you do it, nor saying the price is illegal. You can even say the price of even the black market, it is no longer a crime. Remember all those brokers jailed in 2010? The case against them has been dropped, as the new Foreign Exchange Illicit Bill, decriminalized everything they were accused of doing.

So, why not forget about bonds? The Venezuelan Central Bank will actually state at which rate each batch of dollars will be sold on average.

Anyway. The new and improved Sicad-2 will begin operating…soon. We still need the rules and regulation. But if we are to believe the authorities, it will work something like his:

You go to your friendly bank, where you will say you want to buy x dollars and you given them a range of prices at which you want to buy (or sell if you are deranged enough). (You need an account in Venezuela and in dollars first)

Your bank, will create a spreadsheet with all its postures, which it will send two or three times daily to the Central Bank. You can only place a single posture per day. Unlimited, in amount or price.

The Venezuelan Central Bank will come back to you and say Si-Sicad for you, or No-Sicad for you, without explanation, after “matching” buying (bids) prices and sell (offer) prices. At the end of the day, the Central Bank will publish only the average price of all dollars sold.

So, this is not a market, it is a pseudo-auction system, where only the Central Bank will know bids and asks and what it does with them.

Fairly opaque in the details.

The system has no upper bands, limits and is flexible, but nothing says there will be unlimited offer to all the bids. In fact, I am sure there will be limited offer only. Nothing says that if you want to buy 1 million dollars at Bs. 100, they will give it to you. In fact, they may give it to you cheaper, as the Government has the right to intervene to keep the price down.

So, it is still is unclear. My opinion is that the Government has very limited resources for this market. Thus, initially there may be some optimism, which will fade fast. No matter what you may have heard, the parallel market (it is no longer black) has barely budged, suggesting some level of skepticism with the new Sicad-2 system.

At the same time, there will be little demand at the beginning. The large buyers (multinationals) will have to review the foreign exchange agreement, the regulations and the Foreign Exchange illicit Bill before they can even begin to operate in this new Sicad-2 market. The small buyers (you!) will have to open a dollar account in Venezuela, which is apparently one of the requirements to participate.

So, it may be on Maduro’s first year anniversary as President in mid-April (which falls in the middle of Dieterich’s prediction) before Sicad-2 shows its true dynamics and whether it is a real positive or not. In my humble opinion,there will be too many exchange rates, not enough transparency and too many limitations. The Government in trying to solve economic distortions, simply creates more and more, without understanding the true implications. To begin with, a new price for the dollar, which represents a huge devaluation, implies allowing prices to rise in the middle of 56% inflation per year. The Government has yet to understand that a foreign exchange market is not economic policy, but a transactional part of the economy. If it does not create other rules and regulations, it will all be a waste of time.

But if Sicad-2 is all they could come up with in eleven months, there is little hope for the rest of the policies. Thus, maybe Dieterich is right.

The Chavista Constitution of 2000, created the position of the People’s Defender, better translated as the People’s Ombudsman. This was a great idea of the 2000 Constitution, which, as so many things with Chavismo, it has received really bad implementation.

Like really bad…

Because those holding the position in the end have only sucked up to Chávez then, or Maduro now, defending the Government and seldom doing what Art. 280 of the 2000 Constitution mandated them to do:

(Article 280. The People’s Defender is in charge of promoting, defending and watching over the rights and gurantees in the Constitution and the international treaties about human rights, besides the legitimate, collective and diffuse interests of the citizens. )

And so far, the only person to occupy the position and do her jov was the first one, Dilia Parra, who was the only one qualified and truly independent to hold the position. The other two, German Mundarian and the current one, Gabriela Ramirez, have been know as the “Defensores del Puesto” (“Defenders of the position”) spending their time more defending the untenable positions of the Government, than those of the people.

Over the last few week, little has been heard from Ramirez, while repression blossomed in Venezuela. Ramirez, who reached her position with little human rights back1groung, reached her position after failing to win the race for Mayor of Baruta, three years ago and her buddy Diosdado brokered the position for her in a deal with Chávez.

But she is clearly not qualified. She has no interests in human rights and protecting the people. At least in three years as the People’s Defender, she has shown no inclination for this. She is also a terrible (abominable?) speaker and knows very little about her job.

A typical Chavista Government official…Not qualified, not competent and fairly ignorant.

Today, there was a controversy over Ramirez, based on the video above. Despite three weeks of protests, Ramirez has been fairly invisible. In fact, only four days ago, she made these absurd statements, in which she claimed not to have any accusations of torture, despite individuals making them, as well as those of Foro Penal Venezolano, which have been very clear and extremely specific and quantitative (Alfredo Romero tweets updates regularly under @alfredoromero). In fact,Ramirez claims that “bullets” have come from “somewhere else” while there are numerous videos which show cops, police and National Guard shooting real bullets at people, exactly what Ramirez says is prohibited.

But today Ramirez in one single sentence showed not only that she is not qualified for her position, but that she has not even bothered to learn the basic tenets of what human rights are.

The controversy arose because people took her statement “la tortura tiene un sentido, por eso nosotros tenemos que ser muy rigurososos con el uso de los términos. La tortura se emplea para obtener…” (Torture has a sense, that is why we have to be rigorous in the use of terms. Torture is used to obtain information…) to mean that she thinks torture is justified.

While this may be what is understood or derived from her statement, I think it is just a consequence of how badly prepared she is to speak in public. But if her words were wrong, her true intent was just as bad, because while I don’t think she was trying to justify torture, she was trying to walk a very fine line and differentiate between torture and cruel or degrading punishment. Suggesting the “Torture” Committe only had to deal with those cases where people were obtained to obtain information.

But it just so happens, that Ramirez is stupidly and ignorantly wrong, because the United Nations, the OAS and even the Venezuelan Government have tried precisely to differentiate that very fine line. And Venezuelan law even includes “intimidation” as part of torture to make Ramirez look even worse and even more ignorant.

Thus, in her attempt to defend the Government, instead of doing her Constitutional job, Ramirez showed her ignorance of international law and the fact that she is not complying with what the Venezuelan Constitution says or what international says are the rights of the people. As such, she could be one day charged for not preventing “torture, and other cruel, inhuman or degrading treatment or punishment” an as stated very clearly in the convention, people like Ramirez will not be able to argue that they followed superior orders as “they will be held accountable individually”

In fact, Ramirez’s statement justify her immediate dismissal from her position, something we know will never happen. Which simply proves the point that Venezuela is a Dictatorship, where human rights are not only nor respected, but those in charge of defending them are incompetent, ignorant politicians who only want to suck up to the highest levels of Government to scale positions in the future.

A profoundly sad and disturbing episode, which simply surprises nobody. Scruples is not a word Chavistas have in their vocabulary, nor is it a concept they can understand or comprehend.

My good friend Paul Esqueda, a very distinguished Venezuelan, with a career in science and science and education management, asked me if I could publish here his article expressing his concerns about where Venezuela is headed. I do so with great pleasure.

Who is in control in Venezuela?

Paul Esqueda

The recent events in Venezuela suggest a very concerning trend. The Government seems to control the centers of power (the Military, Congress, the Supreme Court, the National Elections Board and most of the governors and city mayors). However, a critical piece such as the economy is completely out of control. Inflation is at an all times high (55%), the parallel market rate of exchange of the national currency is ten times that of the official rate fueled by an obvious shortage of US dollars, and the supply chain of consumer goods is completely disrupted with the consequent shortages of vital consumer goods in the supermarket shelves. There seems to be a mix of improvisation and ignorance with the end result of very poor management of the economy. In addition, oil production seems to be declining, which is the most important source of revenue of foreign currency. Furthermore, the Government has not be able to honor the debts to most suppliers from neighboring countries and the international airlines. These are just some of the serious imbalances of the economy that may lead Venezuela to be a failed state.

Since Chavez came to power he began the creation of a “militia force” to defend the revolution. At the time, most public figures warned that this type of paramilitary forces presented a huge potential danger for our society. They have no clear chain of command, they are not trained to apply the rule of law, and most important they could get out of control at any time with their fire power. This is actually happening as I write these lines.

The Movement of Democratic Unity (Mesa de la Unidad Democratica, MUD) gathers most of the opposition groups. They have made every effort to turn things around by pointing out the economic imbalances with very little success. As a very democratic movement, the MUD is a heterogeneous group with many critical thinkers and very strong intellectual power. The MUD has promoted peaceful protests with rallies that have had massive attendance. However, things are getting out of control because the protests have taken root in many neighborhoods in Caracas and in most large cities in Venezuela setting up barricades (guarimbas) and progressively paralyzing the economy. The student movement, mostly from higher education institutions, are leading the guraimbas together with the local residents in each neighborhood. By the way, the MUD has very little control over the student movement. The MUD has constantly called for peaceful protests and have condemned the guarimbas as a violent and improper approach. The Indeed, one of Venezuela’s most important political analysts and economist, Luis Vicente Leon, referred to the guarimbas as a “path to a cliff.” Most importantly he claims that there is a “lack of leadership” and no clear way to funnel the powerful street protests.

The Government has opted to exercise all its power to crush the guarimbas by massive repression and shear use of military and paramilitary power. The consequences are evident, blatant violation of human right and a fake approach to power. Nicolas Maduro would call for a peace conference and dialogue only to turn around a few minutes later and order his militias to “wipe out” all protesters. Words definitely do not follow action, a clear lack of integrity that does not contribute to generating trust.

The Organization of American States (OAS) has been called to intervene by invoking the “Democratic Letter.” This is an agreement signed by all OAS members with a commitment to enforce democratic principles such as respect for the diversity of ideas and freedom of speech as we understand it today. OAS is moving at a snail pace arguing that Nicolas Maduro was democratically elected and that Venezuelans should resolve their issues among themselves. On the other hand, Nicolas Maduro argues that the protesters are a minority that only represent the upper class in Venezuela. Nothing further from the truth, the protest and barricades have taken root in all neighborhoods. Those low income neighborhood that stay quiet are under the rule of the militia thugs that violently repress any sign of dissent. Two important conclusions: the guarimbas need leadership badly since they are out of control and democracy is extremely lacking in Venezuela.

The whole argument of this article is that the Government is not in control of the economy (the main source of the problem as admitted by Chavista Governor of Tachira State, Jose Vielma Mora) , the militias are out of control, and the guarimbas are out of control. So who is in control in Venezuela? Is Venezuela at the verge of becoming a failed state? Is chaos going to reign in Venezuela? That is why the help of OAS is badly need in Venezuela. The human rights and freedom of speech pieces are pale next to the real challenges that Venezuela faces.

It has been four weeks since the first San Cristobal protests that ignited the current wave of repression. Some people are still trying to understand what is happening, why it is happening and where it will end. I have no answer to where this will all go, but I do think I understand parts of what took us to where we are.

The current wave of protests began in Tachira State, as understood well by Girish Gupta in his article in The New Yorker, the people of Tachira are among those hurt the most by shortages in Venezuela, add to that a student protest, some jailed students taken to another State, which is illegal, and you had the necessary sparks to get this thing going.

But this wasn’t enough. You have to add to the combination tha,t coincidentally, that same week, Leopoldo Lopez and Maria Corina Machado, both called for protests under the slogan “La Salida” (The Exit), something which many thought was a bit too radical and a bit too much at the time. Combine that with a march where two people are killed and have the Government blame and even jail Leopoldo Lopez for the violence that day. and you have the perfect combination for the flare up of protests we have seen in the last two weeks.

I mean, look at it. The Government could have defused the whole situation at many points in time. In fact, it even accused policemen of causing the deaths in the violent march that Lopez was accused for. What a perfect excuse to reduce tensions, release Lopez, send some jailed students home and give the Government some working space. Instead, Maduro does exactly the opposite: Lopez remains in jail, more than 1,000 students jailed, 60 accusations of torture, 20 dead and Maduro on nationwide TV calls on his paramilitary groups, the infamous “colectivos” and go and repress the opposition.

Which they have done in earnest since two nights ago.

And I could choose many pictures or videos, but here is one with some repression which makes me ashamed of being a Venezuelan:

And I ask the same questions I have asked before: What is Maduro’s strategy? Why hasn’t he defused the conflict? Is he so afraid of Lopez? Why more repression, which begets even more protests? Why provoke the paramilitary “colectivos” into a civil war?

The answer is I don’t know, because what is coming in terms of shortages in April and May is so much worse than the current official “you can’t find one of three items in the supermarkets”. And I really don’t see how you can blame the opposition this time around.

Remember Sicad 2? Well, Venezuela remains Sicad 2-less two weeks after it was first announced it would start operating and I am willing to take bets on the fact that despite Ramirez’ claim today, Monday will come and go and nothing will have happened, unless they fake it. Not only do we not have a Foreign Exchange Agreement, we do not have regulations as to how this new market will work. Maduro has been improvising for eleven months as President.

Call me skeptical, once again.

But going back to where the Government wants to go, it is a very dangerous game. The next step is that beyond “Guarimbas”, where neighbors protest by blocking each others way, just because they want and they can, by now people are tired of the repression and being repressed. Today two people died, none of them students, one a National Guardsman and another a “Moto taxi” driver, which could or not be a euphemism for a a member of a paramilitary “colectivo”. I just don’t know.

What I know is that people are fed up with the repression and they are ready to attack back. And it could get ugly. Guaicaipuro Lameda, a retired General and former Chávez Minister, makes the point today that conditions are the same as those that preceded the 1989 infamous Caracazo, which Chávez used in part to become famous. And they are very similar. The “people” perceive a Government that is not only not providing basic necessities, but is showing that it is far and removed from the people. People forget Carlos Andres Perez was elected with 56% of the vote a month before the Caracazo. That is how fickle Venezuelans can be.

And yes, the Caracazo was mostly about looting, but that was once it got beyond control. Before that, it was protests. Protests about unfulfilled promises. Protests about frustrations. About crime, about inflation. There were no shortages. And repression only got out of hand once the protests were out of control. Are we there yet?

And we are certainly close to it, based on what people experienced today in Los Ruices, where coincidentally the death of the National Guardsman and the moto-taxista took place. The people of Los Ruices are tired of it. tired of Colectivos, Tired of guardsmen, tired of tear gas and tired of being repressed day after day for protesting.

And it all goes back to San Cristobal. The whole city is up in arms, such that the Governor had to come out and say he disagreed with the violence and the jet planes flying overhead as a threat (he backed down a bit, but he wants to be considered to replace Maduro). San Cristobal is not middle class and the National guard seems afraid of people by now. Neither is El Guarataro, nor is Caricuao, nor is Petare or Las Minas.

But instead of backing down, Maduro presses forward. He lost his international prestige as a Democrat? Insult the Panaminian President Martinelli. Which shows he what he thinks about Panama.

And Ramirez came back saying the Chinese and Russians will lend the Government money. I just doubt it. Not now, least of all under this conditions. I mean, the Chinese are so conservative with their money that they keep it mostly in US Treasury Bills. They are not going to lend to a shaky Government with a nebbish leader. What if the Government after it decides to place the Chinese at the back of the line?

And they should. They should wait with the Brazilian and Argentinean “alcahuetas” in the back of the line. After all, the Venezuelan private sector should be paid first, no? It is crucial for the future, despite what Maduro and his cohorts may think today. And between the Panaminians and the Chinese, the choice seems quite clear.

As for the Cubans, the problem is that most will want to stay here, rather than go back. They think Venezuela is savage capitalism, where you can live off remarkable opportunities for arbitrage and where corruption is rampant.

Another reason why this incapable revolution has to be eradicated from the land of Venezuelans.

The question remains: What is Maduro after? Suspend constitutional guarantees before the real shortages begin? Blame the opposition for those upcoming shortages?

It could be, but somehow, it seems as if the people of Venezuela are beyond those tricks. Which is why I see more violence, almost civil war-levels ahead. Until the Government makes a mistake. The opposition can make many, but they are not in charge and they are not armed. But any use of excessive force by an aggressive and well armed Government, could simply be the beginning of its end.

After three weeks of repression, fifteen dead, at least 60 reported tortured and more than eight hundred detained, including opposition leaders and reporters, the Venezuelan students have at least shown the world what little respect the Maduro administration has for the human and civil rights of the people. Venezuela has seen similar repression before during Chavismo’s rule, but never has it been compressed in such a short period of time. Or taped, photographed and videoed so extensively. By now, it is clear around the world, how prevalent repression, censorship and violence are under Chavismo. Maduro talks peace and repproachment with the opposition, the day after calling an opposition lady a prostitute and the day before the most repressive use of force in Caracas. Maduro decides to give two days of vacation ahead of the four-day Carnival break, in the hope or belief that by next Wednesday people may have forgotten what he has done.

How little people learn from history! In fact, Hugo Chávez believed the same thing in March 2002 when the Easter week vacation arrived. He thought the protests would subside and all the insults and repression of the previous days would be forgotten. He was gone four days after Easter Sunday, only to return due to the stupidity of those that did not follow Constitutionality after he resigned due to the deaths of April 11th. 2002.

The problem is that this victory by the students has by now become a paradox. Venezuela represents the paradox that in the twenty first Century, as those that were repressed in the twentieth century become Government, Human Rights and Democratic Rights have become less important around the world.

It is an amazing turn of events. I remember the era in which Virela and Pinochet were despicable figures who governed Argentina and Chile. It was beyond my comprehension how famous physicist Antonio Misetich, who had returned to live in Argentina to find his missing sister, could also be disappeared jut like that. Or how Juan Jose Giambiagi, a Nobel class scientist who later became my friend, would emigrate to Brazil and the Argentinian Government cheered. Venezuela was a recipient of the emigration of this era. We heard the stories, we could not believe that this was happening in what were once thriving democracies.

But today many of the same countries are run by those that were persecuted and their silence is deafening. Argentina ignores what is happening for ideological reasons, Colombia for commercial ones, Chile because it is in a transition, but I do not expect much from Bachelet. But the real surprise all these years has been how morally empty Brazil’s left is. You can not lead a region when you behave like that. It will come back to haunt them one day. They have also forgotten history. Sadly, they seem to think or feel that repression is a thing of the past in their respective countries. They think they have the institutions to withstand anything. Think again. Chile was the strongest democracy in Latin America in the sixties. Venezuela took its place. And we know how both turned out.

And that is what makes me pessimistic about the future. Not of Venezuela. Of the whole region. When you hear repeatedly that Maduro was elected (Was he?) from those that are leaders of their respective countries. When they so conveniently ignored that the audits promised to them never took place, you have to wonder what concept of democracy they have in their minds.

And while they are many decent people expressing their outrage at Maduro’s repression and discrimination of those that oppose him, it seems that they are few and far between. And few are powerful. The international media knows by now. Some countries like Panama have stood up on the right side of humanity. But unfortunately, Panama is one of the exceptions.

The rest simply prefer to ignore it.

And I do not expect anyone to come in and intervene in Venezuela, nor do I want them too. Cuba is here already, we should just kick them out.

But I do expect people who call themselves leaders to express their outrage at a Government brutally repressing its people, killing some of them, torturing kids for doing what is a Constitutional right under the Constitution proposed and approved by the party in power. And institutions like the OAS, who have decided not to say much, should also raise their voice. Not only against repression, but about the silencing of the media, the censorship of the Internet and the jailing of opposition figures. Otherwise, they will soon lose their right to even exist.

Because the other paradox is that as the students have continued their protests, the Government has become even more violent. Protests are not going to stop and the current handling of them will only increase their intensity. And the death toll will rise. It is the Government that has all of the tools to stop this, but so far, it has not budged an inch, pushing forward at every step.

And I think the students have won the international media war. And their battle will continue, but nobody knows where it will end.

With an economy in shambles, scarcity increasing and Maduro acting like their is no urgency to attend economic problems, the protests can only add participants.

And those that think that these are middle class protests should think again. It was San Cristobal that initiated the protests and in that city it is a proportion much larger than the middle class that is participating actively in the daily protests. An in Caracas, Caricuao, Petare and Catia have taken part, even if they have pressure not to do so. And I have been in Altamira and talked to the students, anyone that thinks they are just middle class, should visit with them.

My theory is that some in Government are undermining Maduro to have an excuse to replace him from within. But what do I know.

Much like 2002 or the Ukraine today, these protests have unforeseen consequences and ends, Some “tenientico” , for example, can get the wrong idea. Why not? If Chávez tried it, why can’t he?

That is not only part of the paradox, but is also part of Venezuela’s current tragedy.